Reduce Debt Increase Wealth

Debt Relief Programs

September 26, 2021 Charles McDonald Season 2 Episode 80
Reduce Debt Increase Wealth
Debt Relief Programs
Show Notes Transcript

How to avoid using debt relief programs and determine what was the cause of getting too much debt. Before using any debt relief program you must understand why your debt is a problem. MisterChuck talks about these plus other things people do that are personal finance mistakes.

 Articles Links:
https://www.bankrate.com/uk/current-accounts/personal-finance-mistakes/ By Marianne Curphey

https://www.forbes.com/advisor/personal-finance/tips-to-avoid-common-budget-mistakes/ By E Napoletano, Daphne Foreman

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Charles McDonald:

Hello, I'm your host, Mr. Chuck, I retired accountant turn truck driver, I reduce my debt in a relatively short period of time, debt reduction to achieve financial freedom takes commitment, confidence, determination, debt relief programs. This episode is not about which Debt Relief Program to use, or they even use a Debt Relief Program. But if you're considering using some type of a Debt Relief Program, you're probably in financial problems. But before you jump in and pay somebody, a lot of money to help you get out of debt, because why are you in debt, because you owe a lot of people money. So you're not going to really save anything, what you say by not paying a credit card or some loan, by the negotiating of a lower interest rate, or the removal of late fees, etc, you're gonna pay to that Debt Relief Program. So before I get started, I've have created a Excel spreadsheet. To help those struggling with keeping a budget, I will send it to you for free, you can go to my Facebook page, reduce that increase, well, just do a search for that. And fine, find the spreadsheet video that I made on how to use it, you can watch it, scroll through it and see what it's like, if you like it, send me an instant messenger with your email address. And I would like a copy. I like the spreadsheet file for Excel. Now that may or may not work and other spreadsheets it should convert. But it's got your program has to be able to do multiple sheets, because the way I set it up is using multiple sheets. So if you have a free online spreadsheet that you're using, if it will take multiple sheets, then you should be good. You might want to see how many multiple sheets it will work on it and count the number I have I got like eight or nine? I think I don't know. So that's all for that. I have two articles in my show notes that I've provided a link which is where I'm getting this information from. Remember, I used to be an accountant, Attorney, truck driver. And I paid off my debt in a relatively short time period of time. It was about 135,000. And it took me three years, eight months to do that. And how did I do it? Well, that's what we've been talking about for last year plus that I've been doing this podcast. But before you can do anything about your debt, what are the most common mistakes may have made to get yourself into that problem. So you got to be aware of what you've done. So how to avoid using death relief programs, and then to determining what caused you to get into that place. And one of the main things is you avoided your debt problems or you deny that you have a debt problem, which is common with as many people you don't want to met a mitt that you have a problem and you keep putting it off thinking it may go away, is not going to go away until you realize you have a problem and take steps to solve it. You're overspending on credit, you're spending way too much on credit card, and you never get your credit cards paid down or paid off. You should use a credit card like cash. If you need something, you put it on your credit card and a should be paid off within the end of the month. If you're unable to do that, then you're you're spending too much. You may be leasing everything. Maybe you're leasing an apartment or a condo, maybe you're leasing your automobile. So you have all these payments. And and when you get done paying for it, you have nothing to show for it. You have no assets. You failed to plan ahead. Whether it's a wedding purchase of a home, or retirement, or children, you didn't plan ahead and you don't keep a budget. It's not just money problems you have, but you have behavioral problems also. Denial, lack of planning, leasing way too much overspending on credit are all items that will get you into trouble fairly quickly. The first article is from bankrate.com. Saw the UK, personal finance mistakes. And number one is thinking that all credit is the same. That the overdraft when you overdraft your checking account that that credit is the same as a credit card, and that the credit cards may be the same as a personal loan, they're all different. And overdraft, you might be paying a higher rate of interest, even though it's nice to have to protect you from bouncing checks. Eventually, if you don't get the overdraft paid off, you're going to exceed your limit. And then you're going to start bouncing checks. Banks now charge up to 40%. I don't know what that means 40% of what you owe, or what you borrow. And credit cards can help spread off the cost of repaying for a big cost item, such as a TV or some furniture, that credit card is a high rate of interest, anywhere from 15% would be a low rate and 20 to 30%, which would be the high rate, the higher the rate of interest, the longer it's going to take you to pay it off and pay it down. Now you can get a credit card, they that will have a zero interest rate on a balance transfer. So if you get a credit card, the that allows that they won't charge you interest for say 12 months or 18 months, whatever the offer states, but there will be a 3% charge on the amount of money that you transferred in to that credit card. That is a good way to get out of credit card debt. If you have a credit card with a high balance with a high interest rate. And you get a another credit card where allows you to do a balance transfer that 3% one time charge spread out over six months, it's gonna be a whole lot less than one or two months of interest on the other one. And then the trick is to make sure you pay it off before they start charging you interest, I'm pretty sure they go back to day one and recalculate interest. So if you if you transfer over $3,000, you got 12 months to pay it off, make sure it's paid off in 12 months. Now I've talked about that before. And personal loans may be a cheaper alternative than a credit card, or your overdraft on your checking account if you're going overdraft on a regular basis. And the idea there would be to borrow money as a personal loan, put it in your checking account and forget it's there and you have the extra money there, too. In case you exceed the amount of money that goes in your checking account from your job or your income. Make sure you pay all your payments on the due date or before in a timely manner because everything is gonna be affecting your credit score. And you're overcoming it financially is the second problem. It's easy to overstretch your finance when there are so many conflicting demands and young people aged 16 to 24 old years old, are often the most committed according to a CEO of bank, he may or may n t have a regular steady i come. You maybe rent an a artment for the first time and y u have utilities and food and t ings that you really didn't t ink about to try to shop a ound. For your Central's like u ilities try to get the best d als you can especially on internet service. don't subscribe to cable TV stream instead. And only use one no more than two streaming services. Keep your costs down. And number three is being stunned by hidden fees. Maybe you agree to something and you're late so you have a late payment penalty. You forget to pay off your credit card because you're on vacation. You dip into the red on your current count without asking which means you kind of overdraw your credit card and your fixed rate mortgage still comes to an end And you'll find yourself on the lenders more expensive standard variable rate, instead of a fixed rate because maybe you made some late payments, how to avoid, be aware of everything. Whenever you sign up for financial products, remember to ask for the terms and condition and potential charges. set a reminder on your phone account or so you know, when your contracts are up for renewal. Set aside an hour a month to shop around for new providers and keep tabs on the terms and conditions of any financial product you take out. Go through your bank statements to check you're not overpaying any of your providers, be aware of the cost of ending contracts early, including loans, mobile phones, broadband and mortgages. I've never had a mortgage where if I paid it off array, I would get assessed a fee. Now I did my last mortgage was if I paid it off, within the first three years, I would have to pay a $300 fee, which wasn't all that bad. But I figured I was gonna pay it off in three years. I think it took six. So I didn't have to worry about that. forgetting to make a budget. Most people don't forget to make a budget, they just never make a budget. The reason you want to make a budget is how much money do you have coming in how much money you got going out. I'm not saying a budget to reduce your spending. I'm just saying make a budget to keep track of money in and money out. And you'll see you're spending too much. If that's the case, you need to go through your list of things you're paying for. What can you do away with? How can you turn the tie back so that you are only spending what you make or less. And then list all your outgoings list all your income if there's two earners in your household, consider set up a bank account for bills and essentials only and set up a standing order to pay your share into that account. So what that is saying is you you have a checking account, maybe your spouse has a checking account. And then you have a third checking account that's considered joint or both of you put X amount of money and and you pay all your common household bills through that account, such as mortgage, utilities, etc. member you may need to make sure you budget for long term purchases such as reading glasses, work clothes and the cost of running a car. If you're planning to get married, retirement, buy a house or buy a car, you should factor in extra money set aside, it's going to go into a savings account for any of those items that's going to be coming up within your life. And number five, not having a long term savings plan. The first step in savings is a crate eight emergency fund and get it funded. Maybe start out with $1,000. And once you get $1,000 you're set, maybe you can start increase in it a little bit and slowly build it up over time. As you are paying down all your debt at some important and how to start saving you need to have a fund for emergencies equipped to at least three months worth of household bills. And that's the basic minimum. Start with $1,000 and work up from there. y second article is fr m forbes.com. tips to avoid comm n budget mistakes. Well, t e number one mistake is not havi g a budget. So once you identif , you're spending too much a d wondering why that's happenin , why you can't pay off all yo r bills. That's a good time, may e you should sit down and list a l your expenses. If he just o back from an online checki g account and write do n everything you spent money n the last 30 days, rent r mortgage, all your utilitie , car payments, insurance, au o gasoline, food and grocerie , dining out buying clothe , listed all down and put it n categories. The first catego y would be housing, which you kn w your rent or mortgage a d everything associated wi h housing, which be all utilitie , and I would include intern t service and cable TV or yo r streaming services. would all e listed under housin . Transportation would be all yo r automobiles expense. If you ha e two cars, separate per car, yo r car payment, repairs, gasolin , everything you spend on ea h car. And plus add on line f r maybe taxis or Uber, or publ c transportation if you're usi g those items. And you may e could put transportati n airfare. If a car, if you trav l a lot, you might want to o that. Then we have credit ca d debt is what I call it or s displaying debt, loan and loa s and credit cards that are n t associated with your housin , and or transportation. So t would be credit card deb , personal loans, student loan , things like that. Then we ha e daily living expenses that wou d be groceries, and anything el e that you may have on an ongoi g regular basis. If you want o see some examples, y spreadsheet has a list of a l them. So if you go to y spreadsheet of member , Facebook, you can watch t e video I made on how to use i . And you can stop it and zoom n and get an idea of the differe t categories. So tips to avo d these common budgeting mistake The first number one mistake is skimping on emergency savings. Your emergency savings should be the number one thing that you do to build up first, when you're especially when you're first getting started. If you have some emergency savings, good for you, I congratulate you, you're ahead of everybody else. If you're only budgeting for your monthly spending and not your savings, you budget may be doomed from the get go. Life happens when we're busy making other plans. And every reasonable budget needs a line item for emergency savings. If you're one of the 39% of Americans who don't have an extra $400 in a bank for life unexpected expected blimps, you put pressure in your overall finances trying to cover costs. The idea of an emergency savings account is for the unexpected. I just had Plumbing Repair. Luckily, I don't have any debt. So I have plenty of savings. It was expensive, I own my own home, and it's paid off. So at least I don't have to pay expensive mortgage, I was able to pay for my Plumbing Repair and upgrade it and go way more than what I thought I needed. But once I saw the inside of the pipes when they cut them out, and I looked at it as I'm glad I went the extra mile, I solved the problem with one repair instead of multiple pairs, which is the cheaper way to go. It may cost more upfront, but over time is going to be a little bit less expensive. Experts recommend an emergency fund of six weeks of your take home pay, or six weeks of the bills that you got due. If whichever is higher is what I would say. Try setting as small attainable goal like $25 per check, or 5% of the income. Then set a savings goal like $250 once you hit the savings goal, set a new goal. So they're saying do it in small incremental steps. So if $1,000 seems like it's unattainable, set the goal for $100 then reset the goal to $200 etc. They'r saying $250 whatever works f r you. The idea is to get in t e habit of saving on eve y paycheck. Budgeting Mista e number two, relying n guesswork. Maybe you're tryi g to create a budget you're n t really sure how much you' e paying for what ever categor . This is pick a category li e groceries, why are you guessi g you might guess wrong on a sp n $200 a month on groceries. A d then at the end of the month y u find out it was $800 because y u spent $200 a week. So you kn w under budget it for grocerie . If you've ever gone back throu h your checking accoun , especially if you have a deb t card, or if you know use it n you know a credit card, go ba k to your accounts that you use o pay for your groceries and o back a month and add them up a d divided by the number of ite s you added together and I'll gi e you an average. Now you're doi g a much better job of sayi g thing up that budget, and y u have a better idea, you m y think that your grocery bill s $200. But it turns out to be 8 0. But if you average it out, ou might have budget for $750. So you're in the ballpark. O er time, you'll get a bet er number, if you keep track of t. And then budget Mistake num er three, is not tracking y ur spending, you said we went to the trouble to set up a budg t. Now you're not even knowing ow much you're spending. You're ot even comparing what you spend to your budget. What good's that is not doing anything. Other th n, oh, I'm aware that I hav a budget and maybe I'm trying to keep it under X amount. But ou have no clue how much ou already spent, or how m ch you're going to spend. he budget isn't a set it and for et it tool. For a budget to be successful, it's essential to your digitally track where y ur money goes and what it buys e ch month. If you're not track ng your discretionary spendi g, even the tiny purchases you m ke on a coffee or snack, could be throwing your budget out of whack. A very important bud et Mistake number four, ot budgeting for wriggle room, ie not going to be able to pred ct what you're going to buy or spend money on every month I just had a big major repair my plumbing, I had no idea that my clogged drain was going to et clogged up. And even if I did I probably would only budget $ 00 for it. Because that's wha I usually pay to get a dra n, unclog. And there's way m re than that, because it was ma or surgery on my plumbing pip s. Give yourself some wiggle ro m. I do like in housing, I g ve myself $150. And I call it supplies. And what that would be for if I buy salt from my wa er conditioner. Or if I buy ir filters for my furnace. Or i I have a leaky faucet, my got to go and buy some seals or something to stop the leak or maybe even buy a new fauc t, then I have some money in he budget. Some months, I may ne er use it other months, I ay really exceed it. But ther 's something there is the poi t. And then if you don't use it that gives you extra mo ey within your budget, which sho ld be extra money in your check ng account. If you stayed on y ur budget, and that money, ou could set extra money into y ur emergency fund. Remember, y ur credit cards, you should only be making the minimum payment wh le you're trying to get your l fe under control. And build up t at emergency is number one, tha 's more important than paying ex ra on a credit card. Because t at extra you pay on a credit c rd is not really going to save ou over time, very much money. nd over time. If you use my program, what I say to do, ou will be paying off your cre it cards much faster, and then an extra 50 or $100 a month t at you're doing. Budget Mist ke number five is cutting out he fun budget some entertainm nt for yourself. You can't be ll gloom and doom. If you a e, you'll never stick to he budget. If you enjoy going ut to the movies, maybe onc a week, maybe do it twice a mon h, you can cut back but not cut ut is my point. So if you're go ng to the movies three time a week, and you can cut it down to two times a month. You're go na save a bunch of money unless ou have some type of members ip thing that allows you to do t. And maybe you're saving money I don't know. That's just an example. And budgets t ey Mistake number six forgett ng about your family. When you h ve share a household is natura ly you have a shared financial l fe with that person or persons in some regards. It's ea y, however, to forget to talk ab ut the budget. When the hustle nd bustle of daily life keep ou both busy. Without frequ nt conversations about goals an a budget to help you activ te those goals. Spending can go awry, and progress can slow. So avoid this budget mistake fin a way that works for y ur relationship to talk about mo ey regularly. Maybe it's a cas al meal out where you can sh re your goals and process i a relaxed environment. It could be a shared spreadsheet where ou in your apartment track nd spending and expenses which I ve had a spreadsheet set up t at you can have for free. The ey is to keep a Dhow going nd catch potential budget probl ms before they happen. hav a chance to derail your drea s, especially as one of you ha a spending problem, help e ch other, don't fight with e ch other be nice and kind, nd remind each other on a regu ar basis that you're trying to et your debt under control. nd budget Mistake Number eig t, which go back budget Mist ke number seven, having an unrealistic expectati You might sit down to make a budget and feel like it's enough to fill out all the numbers and you want to put the money each month toward your student loans. You want to pay extra towards your car payment. But numbers on paper may not work in practice. Don't sabotage your chances at budgeting success by being unrealistic with your expectations. I'm gonna say, even if you have a budget, and you're just getting started with it, maybe you've had a budget for a while and you've gotten things under control. You need to put all your credit cards or your auto loans all your student loans in order by highest interest rate, you need to concentrate on the highest interest rate loans first, and pay those off, then work your way down. That will save you the most amount of interest, the less you pay in interest, the faster you're going to pay off the principal. It's just simple math, if you want to maybe get one credit card zeroed out, so you have it as a backup. And it has a lower interest rate. Okay. And then Mistake number seven, not updating your budget. So you set up your budget and you figure it out, like again, grocery bills, you figure out an average of $725 a month, and you've been strict, you've been following it, you've been watching what you spend at the grocery store, you don't buy anything until you need it, you find out the next month, your average spending at the grocery store was 625. But you don't update your budget, he should update the budget down to what it is. It's okay to go over by $10 or $20. But if you'r $100 $200 off, you need to budg t it down and keep you more n line with what's going o . That's the purpose of a budg t is so that you know exact y what's going on with your mone . Keeping track of your mone . Budget Mistake Number nine, a d especially the younger peop e skipping the retirement saving . Only thing I have to say is f you have a job, your employ r offers any type of retireme t plan, let's say a 401 k is t e most common and they're doi g some type of match no matt r what it is, you should be doi g it. Because if you're not doi g it, you're leaving a benefit t e employer is offering you on t e table. It's free money. W y aren't you taking advantage f it? The younger you start n saving for retirement, the mo e you're gonna have when y u retire. If you're 25 years ol , I know it's tough. Maybe you' e looking for that first hom , maybe you just got marrie , maybe you have a child, I kn w it's tough, but put $10 a p y OSI for retirement, you'll nev r miss it. And then over tim , increase it five by $5. t doesn't sound like much. But n 40 years, that little bit th t you started will grow mu h faster than what you think. A d you might put in let's say ov r your lifetime, you might sa e 300,000 actual money that y u put into the retirement pla . But that retirement plan cou d be worth a million, a milli n and a half or more. You nev r know. Let compound interest wo k for you. I'll be back in o e moment was my final thought. f you listen to this podca t reduce that increased wealth n an Apple device. Scroll throu h all the episodes towards t e bottom and you can select wri e a review and leave your commen s and you can rate this podcast. I appreciate all feedback. And I thank you for your time in doi g so. If you want to keep yo r debt under control and avo d using eight debt Relief Progra , you got to start with creating a budget. And you got to ke p track of that budget, you got o track your spending. But befo e even do that, you got to adm t that you've been avoiding yo r debt problem, or been denyi g that you have a debt proble . You got to keep yo r overspending on credit down. n fact, he got to quit usi g credi And you're leasing way more than you should be. Maybe you're leasing your apartment, maybe you're leasing a car, or maybe two cars, maybe you're leasing the furniture that you're using. And when the lease is over, and you give everything back, what do you got to show nothing. And you failed to plan ahead, to save in advance for a home before having children and before getting married. And, of course, the most important place to save for is your retirement. And your spouse's retirement is not just a money problem where you have that you may have behavioral problems, avoiding your debt problems is not going to make it go away. And one of the first steps you can do is create a budget and identify where you're spending your money. Even when you can see it in black and white on paper, or on a computer spreadsheet is easy to identify. You can do away with that spending. You can reduce your spending, it will help you it's important for your future. If you want to be happy and have financial freedom sooner in life rather than later in life. You got to start now, the sooner you start, the better off you're gonna be. If you're interested in a spreadsheet, I've created a spreadsheet that helps you track your budget and your actual numbers. Go to Facebook, do a search for reduce that increase Well, you can look at the video I created. If you decide you want to get that spreadsheet, I will send you the file this instant message me and give me your email address. So I will send you the file, Excel file. If you don't use Excel most spreadsheets will convert it for you. But make sure your spreadsheet program can do multiple sheets or multiple pages.